Wednesday, May 21, 2008

Economic Growth & Misery, Ethiopia’s paradox

By Ephrem Madebo

Three years have passed since Sufian Ahmed hastily and injudiciously predicted Ethiopia’s economic wonder and its high-speed transition into a middle–income nation in 20 years. I have no problem with the prediction itself; I love to see the prosperity of Ethiopians no matter which party is in power and regardless of my personal economic and social achievement. As the top executive officer of Ethiopia’s Ministry of Finance & Economic Development, Sufian Ahmed has all the necessary information to estimate future economic growth in Ethiopia. I wonder what kind of objective data (other than his subjective judgment) he used to make one of the most preposterous predictions of all time. Unfortunately, three years after his optimistic predication, Ethiopia is yet heading to another phase of drought and starvation.

The term "economic growth" refers to the increase of a specific measure such as real national income (NI), gross domestic product (GDP), or per capita income (PCI). GDP is the measure of the goods and services produced by an economy in a specified time usually a year commonly expressed in terms of a measure of the aggregate value-added output of the domestic economy. When the GDP of a nation rises economists refer to it as economic growth. The real progress of nations is not measured by a single measure of growth such as GDP, it is also measured by the degree of access its citizens have to economic institutions and to the political process.

Recently, statistical indicators have been used as a powerful tool in promoting human rights by effectively quantifying conditions under which people live. The UN is one of the vanguard organizations that uses statistical indicators to measure the well-being of people in member nations. In fact, the UN is not just an organization that measures the well-being of people; it is also an organization that injects capital into the economies of poor countries to help them fight poverty and build participatory political institutions.

The World Bank has been in Ethiopia since 1945 with a primary objective of tackling poverty bad-governance. In Ethiopia, and in many other developing countries, the World Bank supports governments in the development and implementation of programs geared towards accelerated pro-poor growth. Despite its constant pumping of capital, for the last 63 years, the World Bank could not shield Ethiopia from being the symbol of poverty and bad-governance in the world, i.e. the World Bank did not meet its dual objective in Ethiopia for 63 years. What went wrong? Before answering this question let me introduce you to the key idea of this article.

Evidently, the injection of a large dose of aid fund, loan, transfer capital, and domestic capital formation has induced uninterrupted GDP growth in Ethiopia between 2001 and 2007. In the last five years, the government of Meles Zenawi, the World Bank, and the IMF have produced voluminous documents that highlight the growth of the Ethiopian economy. As poor as Ethiopians are, such a claim would have been valid only if the heralded growth had a positive impact on the daily life of poor Ethiopians. Economic growth has no meaning to the majority of Ethiopians unless its benefit trickles down to them. So if the economy is booming why do many Ethiopians suffer in poverty? Why does the UN Misery Index report show Ethiopia at the bottom of its list three years after Sufian Ahemed’s optimistic prediction? By the way what is Misery Index?

Misery Index is a measure of economic well-being for a specified economy, computed by taking the sum of the unemployment rate and the inflation rate for a given period. An increasing index means a worsening economic climate for the economy in question, and vice versa. With a visible high inflation and unemployment rates, one shouldn’t be a Princeton economist to estimate Ethiopia’s misery index.

A recent United Nations Human Development survey indicates that besides war, AIDS, and natural disaster, Ethiopia and many Sub-Saharan countries suffer from the broadest range of social & economic disadvantages. The survey examines the availability of schools, clean water, medical care, and whether people can play a role in politics. Moreover, the experimental survey measures a nation's growth not by economic figures but by statistical profiles of its people and by what they can expect from life. Apart from Sierra Leone, which is ranked last, the UN survey indicates that the other most disadvantaged nations from the bottom up are: Niger, Burkina Faso, Ethiopia, Burundi, Guinea-Bissau, Mozambique, Chad, and the Central African Republic. Out of 195 countries, Ethiopia is 192nd, better than only three nations.

What happened to billions of dollar that the World Bank has been transferring to Ethiopia for over half a century? As I clearly indicated above, the World Bank sets objectives to every aid recipient before dispersing aid fund. Since the beginning of the World Bank's presence in Ethiopia, its support has been directed towards assisting the country to achieve sustainable economic growth while reducing poverty. Currently, the Bank's Interim Country Assistance Strategy (ICAS) focuses on both good- governance and economic growth as the central pillars of the Bank’s support to Ethiopia.

In spite of the recent economic growth that benefitted a handful of élites, the World Bank’s overarching objective of poverty reduction has been a complete fiasco in Ethiopia. In addition; the quality of governance has been deteriorating in direct proportion to the number of years the World Bank has been in Ethiopia. Here any rational person can draw the following three conclusions: The World Bank does not enforce its objectives, or the bank does not have a monitoring arm. Aid funds are not properly used in Ethiopia. Despite the constant flow of bilateral and multilateral capital, bad-governance has stifled economic growth in Ethiopia.
The information that comes from government sources definitely polishes Ethiopia as a peaceful place where people live in harmony. However, the political landscape in Ethiopia remains tainted by the aftermath of the May 2005 parliamentary elections and by the recent hard to believe and depressing story of territorial sale to Sudan. Yes, leading opposition leaders have been released from jail, but the number of political prisoners is increasing with the passing of every single day. To make things worse, the recent exclusive intra-TPLF party election has deepened the rift created by the 2005 election.

Ethiopia is one of those nations that can not survive without foreign aid, therefore, I don’t have the heart to tell the World Bank to stop helping Ethiopia, but I do have the moral and national obligation to advise, or notify the World Bank to at least make sure that the capital it transfers to Ethiopia is meeting the bank’s fundamental objectives. I am confident that the Ethiopian government will efficiently use aid funds if the stakes for not doing so are high, or if there is a consequence for misusing funds transferred from the World Bank. I am not saying the World Bank should be a watchdog over the government of Ethiopia. I have many relatives that live in rural Ethiopia who need clean water, healthcare facilities, schools, roads, and better farming methods. I just want the World Bank to make sure that the Ethiopian government is using the bank's capital to change the life of my relatives and millions of other rural Ethiopians. I do believe the World Bank must establish and follow strict monitoring & enforcement polices to pressure governments in poor countries to change their behavior. Otherwise, the very capital destined to change the lives of poor Ethiopians, will end up disenfranchising millions of people from the political and economic establishments of the country.

The World Bank has operated in Ethiopia for a little over six decades and has helped the regimes of Emperor Haile Selassie and Colonel Mengistu fight poverty and bad- governance. Today, the WB is still pumping a large amount of capital to the government of Meles Zenawi; yet in the WB list of poor countries, Ethiopia is still a leader from the bottom up as it was six decades ago. Currently, the Zenawi regime is re-writing the relationship between "human rights" and "economic development" in its own terms. Sadly, it seems that the WB is treating Ethiopia on the terms of Meles Zenawi. This ugly reality should not be allowed to continue. Either the policy of the WB towards Ethiopia, or the behavior of Zenawi's regime must change. Major donors and international financial institutions are increasingly basing their aid and loans on the condition that recipient nations undertake reforms that ensure good-governance. Why not the World Bank?

The recent shifts in the conceptualization of development and the emphasis of the international community on human rights have re-defined the relationship between development and human rights. As a result, today, human right is not anymore seen as the by-products of development; rather, human right is a critical factor to achieving economic and social development. In another departure, globalization has created the need for a rapid global development. For the sake of poor countries, this rapid global development must not be viewed independently; it should be contrasted with localized ideas of “rights”, “development”, and “civil society”. Here readers ought to understand that “rights”, “development”, and “civil society” may vary between societies and countries. Meles Zenawi and his advisors assume a unidirectional cause and effect relationship between "human rights" and "economic development". According to their assumption, People are not "ready" for democracy until some hypothetical level of economic development has been achieved.

Today, based on the above hazy assumption of their masters, many vocal proponents of the TPLF regime argue that human rights are rewards of development; hence they postpone the fundamental issues of liberty until economic development is achieved. According to this unsubstantiated assumption, to enjoy American type of liberty, Ethiopians must be at the level where Americas are now. These barefaced muggers are telling the Ethiopian people to shut their mouth and expect material comfort and their God given liberty from them. The WB and the government of Ethiopia must understand that no nation can see economic prosperity and no people can genuinely take advantage of economic freedoms without political freedom and without the right for all citizens to participate equally in all aspects of society. Human rights and political freedom are fundamental prerequisites to build a prosperous nation. In the 21st century, human rights and political freedom are no longer separated from economic and social conditions.

I think by now it must be clear why the WB failed to reduce poverty in Ethiopia, and it must also be clear why the majority of Ethiopians live in dismal living conditions despite the billions of dollars directed to them for the last six decades. Ethiopia as a nation lost its battle against poverty due to lack of good-governance and the unwillingness of its elite to stand together for a sweeping system change.

Contemporary development literature frequently contrasts "good-governance" with "bad-governance". In this contrast, “bad-governance” is regarded by many scholars as one of the root causes of vicious circle of poverty in poor countries. Today, lack of money is not the main reason why Ethiopia hasn't been able to pull itself out of poverty; if it was, the UN, EU, the World Bank, and a number of Western governments have thrown a large sum of money at poverty reduction programs Ethiopia. However, a very large number of Ethiopians still live below the threshold of poverty. Ethiopia and other poor nations must concede that the critical building block for poverty reduction is not money, it is governance; a factor that they fully control.

In a concise plain language, "governance" is the process of decision-making and the process by which decisions are implemented. There are many actors involved in governance and one of them is government. Other actors include influential land lords, trade unions, cooperatives, NGOs, research institutes, religious leaders, financial institutions, political parties, and the military.

What is good-governance? Well, if governance is a decision-making process, then good-governance is a decision making process that follows the rule of law, is participatory, consensus oriented, accountable, transparent, responsive, equitable, and inclusive. Good-governance assures that the views of minorities are taken into account and that the voices of the most vulnerable in society are heard in decision-making. Good-governance is responsive to the present and future needs of society, and it also assures that corruption is minimized.

As much as we love our country, we should also be very cautious not to be fully taken by the above characteristics of good-governance. It should be clear that good- governance is an ideal state which is difficult to achieve in its totality. However, to break the vicious circle of poverty and to ensure sustainable economic development, we must take actions towards this ideal with the aim of eradicating bad-governance from our land. We should never be preoccupied with eminence, political power, or with building personal economic conglomerates. Our sole objective must be an oath of personal commitment to the vision of united, prosperous, and powerful Ethiopia. If we have the determination, “the God of heaven, he will prosper us; therefore we his servants will arise and build our land” [our land added by me] Nehemiah 2:20- Amen!


IsThisGuySerious said...

I had a difficult time reading this article because of my constant urge to verbally object and ask questions, so maybe I missed the point, but it really sounds as though you are attempting to place a certain amount of blame for Ethopia's problems with poor governance and poverty on Western society's inability to end it. You mentioned that the World Bank is giving Ethiopia money with an aim that is two-fold; To provide aid to a poverty stricken nation, and to help put an end to bad governance. How is that money supposed to help in any way with putting an end to bad leadership and governance?

It seems that your issue is with the billions of dollars from the world back not making it into the hands of the poorest people, but I'm having a very difficult time reconciling the idea that the world bank providing money to Ethiopa would result in that same money actually ending up in the hands of the poor....why would it? I can understand your discontent with the actions of Ethiopian leadership with specific regards to what is happening to this money, but it seemed as though you were far more interested in "calling out" the World Bank than in holding leadership accountable. You mentioned a lack of restrictions on the money provided to Ethiopia, but there was outrage in 2005/2006 when the World Bank did threaten to withhold hundreds of millions of dollars in aid from the government. The World Bank and other donor's were going to withhold the money and send it directly to humanitarian agencies working in Ethiopia, but instead ended up in the hands of the Meles Zenawi administration. Based on what I've read of your writing (and the few moments of research I was able to do) it would appear as though the money going to the hands of the government is what's causing the problems.

Your article was very enlightening and informative, but I feel like you've let the Ethiopian government off-the-hook by lambasting the World Bank and Western society because the money hasn't made it directly to the people that you believe should have the money (who Im' sure are ultimately the people the WB has in mind when channeling money through anyways). Where is the accountability for the government? Where is the money going if not to the people? What is the government doing with it? Who will suffer should the government not meet any standards imposed by the WB and money is withheld?

Anonymous said...

The World Bank and the IMF are the subjects of many topics. They are particularly known for fostering capital flow from third world nations to the western capitals. This has been documented in many African and Asian countries.
The Bank and the IMF are not only fanincial institutions but they are also policy makers for the poor countries. Just read books by former World Bank officials, like Mr. Stiglitz, and you'll see the economic crimes these two global institutions have commited.
If Ethiopia is to develop, Ethiopia needs to kick the two out!

Anonymous said...

I have always thought that Ephraim suffers from arbitrariness and thougtlessness. This article only confirms by long-held belief in his inability for fairness.

Unknown said...

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